(Note: this article is written for Mac users. If you have Windows tools to recommend, please mention them in the comments.)
The bit rate debate regarding compressed music is one that will be around for a long time. Some people think that any compression of music files is anathema. Take Neil Young. He complained about the poor quality of digital music files, while greatly misunderstanding much of what is involved in compression. He claimed that only “5 percent of the data present in the original recording” is present in MP3 files, without specifying the bit rate used or the original sources, and without understanding that compression is more than just lopping off bits of the music. (Andy Doe, writing on the Naxos Blog last year, published an article, All About Bitrates, explaining how compression works. You should read this to understand some points that most people overlook.)
When you start ripping music, and decide what bit rate to use, you have several options. You could go for lossless, which compresses music around 40-60%. One advantage to this is that you can then re-convert the lossless files to a lower bit rate if you want, keeping the originals as archival copies. But lossless files take up much more space. While this isn’t an issue on computers – hard drives are huge these days – it is for portable devices like iPods or iPhones.
If you don’t use a lossless format, you have to decide which format to use (AAC or MP3), and what bit rate. For a long time, Apple sold music at 128 kbps at the iTunes Store. It is now 256k, which is roughly what Amazon uses in their MP3 store (their music is in VBR, or variable bit rate, so it is not exactly 256k). This is an excellent compromise between space and quality. But you might want to go even lower. What’s important is to find the point at which you cannot hear the difference between an original file and a compressed file, and stay above that bit rate.
To do this, you need to perform what is called blind ABX testing. You are presented with music and don’t know which bit rate you are hearing, and you must choose whether you think it is compressed or not. While this test takes a bit of time – you need to rip tracks at different bit rates, then test yourself, one pair of tracks at a time – the results can be interesting.
To start with, find several songs or tracks that you know very well. It’s best to use familiar music, because you will be able to hear more of the differences (if any) because of your familiarity with the melodies, arrangements, etc. I’d recommend not ripping full albums for this test, but rather individual songs or tracks from different albums.
Rip these tracks from CD in lossless format. In iTunes, go to Preferences > General, then click on Import Settings. Choose Lossless Encoder from the Import Using menu.

Next, add the tracks you have ripped in lossless format and to a playlist. Select them all and press Command-I, then enter an album name, such as Lossless Tracks. You’ll want this later to be able to find them.